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In some coastal resorts, popular with
retirees settling for a life in the sun, the price falls have been far worse. Huge estates have been built with foreign buyers in mind in recent years, leading to a glut of property. Some of the most rapid building happened in Murcia, the region which yesterday asked for a bailout.

By some estimates, an eye-watering 70 per cent
has been shaved off house prices in the last five years as people
struggle to sell their properties.

Customers of Banco CAM have been affected

But despite those falls, prices could fall a lot further. One recent study, by The Economist newspaper, estimated that values were still 27 per cent too high against the long-run average for prices against rents and wages.

Earlier this year, our sister title Money Mail revealed
how one couple had their Spanish property on the market for three years
before it finally sold and took a massive hit on the property. And it is
a story that is becoming a familiar tale in what is now being labelled
‘Costa Catastrophe’.

Britons, along with the locals, also face bruising hikes in taxation as the government scrambles to implement further austerity measures.

From September 1, VAT will go up by three
percentage points to 21 per cent on most items like clothing, sunglasses and
cigarettes.

Separately, the tax on food and drink in
hotels, bars and restaurants will go up by two percentage points to 10 per cent.

The rise was last week delayed to protect tourism - it had been pencilled in for 1 August.

The government has also hiked airport tax - a cost that has been passed on by Ryanair, which flies to Murcia. The extra cost is marginal but more tax hikes across the board are likely as further attempts are made to appease those holding the bailout purse strings in Brussels.

Amid this financial turmoil, some Britons are being driven to the edge.

The British Embassy has warned that there has been a rise in the number of Britons 'seeking welfare assistance' and that the Spanish authorities are reporting an increase in expats in homeless shelters.

Living the dream: One of the glitzy brochures being pushed for Murcia new-build property back in 2007

Briton and former chef John Fraser,
aged 61 and from Inverness, was forced to move out of his home in La
Cala de Mijas, near Malaga, shortly after losing his job as a glass
collector in a bar, the Telegraph website reported yesterday.

'I
am having to live on the street because I cannot afford to rent a
property. I have even spent some nights sleeping under an upturned boat
on the beach,' he told the newspaper. He had previously worked for more
than 40 years as a chef in London.

He added: 'I have been on my own since my wife died. Everything was magic but now my whole life has fallen in around me.'

The Spanish government last week introduced new residency requirements for EU citizens who want to live in Spain for longer than three months - which include providing proof of sufficient income 'not to become a social burden for the state'.

The move has led to an angry response on expat websites. 'Expat in Valencia' said on the Costa-News.com website: 'We've been here nine years and spent almost £200,000 on our house and in the local economy.

'My hubby did work here until he was paid off with the excuse of the crisis - only to have a Spanish family member start his job the next day!

'Now we have been on the Spanish dole of €400 a month for four of us for a couple of years. Should we just leave our house and beg the UK to provide us with a council house, family allowance, family tax credits and dole?'

Falling prices: Even back in 2010 the owners of this three-bedroom villa on a golf resort in Camposol, Mazarron in Murcia, had cut the price from ¿275,000 to ¿185,000 and were said to happy to consider an exchange for a UK property.

If the accumulation of these problems wasn't enough, the crisis has also carried a more unexpected sting in the tail for some expat savers.The £80billion bailout for
Spain's struggling banks means some Britons, who were mis-sold savings products, will find they could lose thousands of pounds [more on this below].

The only saving grace for those trying to stick it out has been the recovery of the pound against the euro. When the exchange rate sunk to near parity at €1.04 earlier this year, it meant that UK company and state pensions paid to expats in sterling had lost 30 per cent of their buying power from when the pound was at €1.40 a few years earlier.

Today, it is back up to nearly €1.29. The downside to that, of course, is that those expats lucky enough to find a seller will discover that the proceeds realised will be worth far less in sterling than they would have achieved a few months ago.

A place in the sun: Denia near Alicante has been popular with British buyers

Fallout from the Spanish banking crisis: 'Our savings disappeared'

Last week, we revealed the savings scandal hurting expats in Spain. Some savers who thought they were putting
their cash on deposit in recent years, on the advice of their local bank, were in fact sold bonds or preference shares in
those banks - if a bank were to fail, these products are not covered by
the national depositors’ compensation scheme.

The situation is particularly bad for
customers of Banco CAM, an Alicante-based savings bank. A simple cash
deposit would earn about 2.5 per cent interest, but that shot up to 3.75
per cent or more if some of the money was put into the complex
packages. But when the bank crashed, there was nobody to buy the bonds
and preference shares.

Hit hard: Faith Baxter-Hague is one of thousands of Brits living in Spain who has fallen victim to the banks¿ mis-selling

Former expats Keith Randall, 81, and
wife Davina are two British victims of the CAM debacle. ‘We put all our
money, which was 77,000 euros, into the bank,’ says Davina. ‘They
assured us there was no risk whatsoever. Now we stand to lose 40 per
cent of it.

‘We do not want shares because as
soon as we take them we will have lost 40 per cent. We asked what the
position was if we do not swap. We were told we would lose our savings.
But we need the money – we are desperate.’

Faith Baxter-Hague is one of the
thousands of Brits living in Spain who has fallen victim to the banks’
mis-selling. In 2009, she transferred savings to the CAM bank as staff
spoke English and offered a good rate of interest.

Faith said: ‘The manager explained
that she could give me just over seven per cent. That was far better
than what Barclays in Spain were offering.

‘So I put €50,000 into what I
understood was a long-term deposit account. I don’t speak much Spanish,
but the document I was given described the contract as a deposito, or
deposit.'

When she went into the bank in March
or April - because no interest had been paid - she was told she had
preference shares. Faith was told there was no interest payment because
the bank had been wound up. Faith stands to lose about £16,000 as a
result.

A legal ruling last week means that more than a million small investors now have the green light to prosecute their banks over the affair. If successful, those actions will, of course, heap further pressure on the finances of those banks.